What different states are doing to help start-ups succeed across India

About a month ago in Lucknow, after flagging off the Union government’s Startup Yatrainitiative, Uttar Pradesh chief minister Yogi Adityanath announced a Rs 1,000-crore corpus to support emerging business through various schemes. “I believe if Uttar Pradesh takes an initiative in this direction, the country will march ahead,” he said. Adityanath also announced the launch of a website […]

About a month ago in Lucknow, after flagging off the Union government’s Startup Yatrainitiative, Uttar Pradesh chief minister Yogi Adityanath announced a Rs 1,000-crore corpus to support emerging business through various schemes.

“I believe if Uttar Pradesh takes an initiative in this direction, the country will march ahead,” he said. Adityanath also announced the launch of a website and a call centre to address the concerns of startups, besides hosting multiple editions of Startup Yatra in other major cities of India’s most populous state.

Startup Yatra is a recent initiative of the Department of Industrial Policy and Promotion (DIPP) meant to create statelevel buzz on entrepreneurship. It will run parallel to the Union government’s much-touted Startup India action plan launched in January 2016. The new initiative is a consequence of several states formulating their own startup policies. While Andhra Pradesh, Goa, Kerala and Rajasthan had their own startup policies before the launch of Startup India last year, 11 more states including Telangana, Karnataka and Bihar have since launched their own policies to nurture and support startups.

Experts anticipate that Startup Yatra will encourage states to compete for emerging companies and investors, broadening the sector beyond the major hubs of Bengaluru, Gurugram, Pune, Hyderabad and Mumbai. “State-specific startup policies were not the focus when Startup India was launched, but then we realised that execution on the ground can happen only at the state-level,” said Karan Anand, Senior Assistant Vice-president at Invest India, which works with DIPP to implement various initiatives under Startup India.

“While startups can avail benefits under the national Startup India policy, having something at the state-level is important… especially because of the obvious reason that (state governments) are much more locally connected and have their own unique requirements.”

What does it mean for a state to have a startup policy? For one, this would involve each state defining startups as per its own criteria and hosting digital platforms that will make it easier for companies to do business. States are also being encouraged to form the so-called Section 8 companies — Invest India is one — that will have executive powers to oversee implementation, aggregate incentives for startups and create a unified application system. Besides, it would allow for identifying anchor startup incubators — support systems for very young companies — such as Telangana’s T-Hub.

Such an incubator could function like a nodal hub for a state’s startup ecosystem to attract investors, provide mentorship to businesses and help them with fundraising. “States do have a role to play in catalysing the startup ecosystem and can have different flavours and focus areas on the kinds of startups they want to support,” said Amey Mashelkar, head, Reliance GenNext Hub, a startup accelerator platform under the umbrella of Reliance Industries. “However, what they do and how they do it is more important.” Amid growing realisation that a onepolicy-fits-all approach may not be fulfilling for all local startup ecosystems, various states are chiseling out ambitious strategies designed to make them stand out.

Odisha wants to emerge among the country’s top-three startup hubs by 2020. The state launched multiple incentives recently, including a monthly sustenance allowance of Rs 20,000 for a year to startups, free legal consultation through online legal services platform Vakil Search, and free software from Chennai-based software-as-a-service (SaaS) provider Zoho. The state, which launched the Startup Odisha website in May, has a registered base of 120 startups now, up from about 30 a year ago.

It will shortly initiate a university-level contest called ‘500 ideas to 50 Startups’. Also in the pipeline is a 40,000-sq-ft startup incubator within IIT Bhubaneswar that will mentor young companies working in areas such as artificial intelligence, robotics, cybersecurity and machinelearning.

“We have been running undergraduate and post-graduate courses in artificial intelligence for the past two years, hence, have the necessary infrastructure and faculty expertise to incubate startups in these domains,” said IIT Bhubaneswar director RV Raja Kumar.“This is besides courses in project management and entrepreneurship that we have been running for two years.”

Kerala, which secured the Union cabinet’s approval for its Technology, Innovation and Entrepreneurship policy in July, has collaborated with the Massachusetts Institute of Technology’s Fab Academy to encourage entrepreneurship right from the school and college level. The state has established Fab Labs in 20 colleges and has cabinet approval to add another 50. Fab Labs train people in prototyping and converting new technologies into products. “The idea is to create a maker culture in the state and kick-start a product ecosystem,” said Saji Gopinath, chief executive at Kerala Startup Mission, the nodal body for implementing the Kerala government’s startup policy.

The state, which has 785 registered product startups, constantly seeks new models to boost its startup ecosystem, said Gopinath. “We need to keep pivoting to take the ecosystem to the next level. We have been focussed on creating a pipeline of early-stage startups for the past two-three years; now, we are looking at encouraging startups that can support industries such as tourism and Ayurveda where Kerala has an edge,” he said.

Gujarat’s model focuses on creating a group of approved colleges and universities that can function as nodal bodies to incubate as well as recommend startups to the government for benefits. These include a Rs 5-lakh grant for mentoring startups and a `10-lakh annual grant for prototype development.

The Gujarat government has approved 32 institutes so far, including IIM Ahmedabad’s Centre for Innovation Incubation and Entrepreneurship, Gujarat Technological Institute, IITGandhinagar and Dhirubhai Institute of Information and Communication Technologies. These institutes together are incubating more than 130 startups at various stages of growth.

“We started very humbly,” said RD Barhatt, deputy commissioner, Industries, Gujarat. “The major gap we are seeing is in organising the startup community that’s spread across the state. Many technocrats had interesting concepts but did not know what to do,” said Barhatt. He is now focused on organising startup events and attracting early-stage investors to the state. All this enthusiasm and excitement, however, may not translate into easy success. Multiple challenges lie in the offing as states have their unique industrial and commercial strengths and weaknesses and a cookie-cutter approach is unlikely to work. “State policies will take at least three-four years to show signs of success,” said Anand of Invest India.

One of the biggest challenges before many of the states developing regional hubs is the paucity of successful startup stories that can help draw in the best brains. “It is a challenge to get the best startups to be based out of Hyderabad since any entrepreneur looking to startup thinks of Bengaluru and Gurugram first. That is changing now but we have to build the ecosystem from scratch. We have quite a few venture investors here but need more startups to bring more investors and vice-versa. That becomes a vicious cycle,” said Nitish Chandra Reddy Ramayyagari, business analyst at Auctus Advisors, which works with the Telangana government in implementing the state’s startup policy.

Telangana essentially works on a huband-spoke model with T-Hub, among the largest incubators in India, as the centerpiece of the startup activity in the state. T-Hub is preparing to move to a larger 350,000-sq-ft centre, expected to be operational by mid-2018. “While talent often concentrates in the usual hubs, it is important to have enough talent availability to take startup-focused initiatives to the next level. This is something we are working on,” said Gopinath of Kerala Startup Mission, which recently announced a fund-of-funds policy aimed at attracting venture capital investors. The state will contribute to venture capital funds provided they commit to investing a certain proportion of their corpus in Keralabased startups.

One of the ways states are trying to give an edge to their startup policies is by encouraging young companies to create new business models and solve pain points within native industries. Understanding the commercial ecosystem is crucial. Invest India is working with Uttarakhand on promoting businesses in areas such as horticulture, religious tourism, herbal products and winter sports. The idea is to encourage states to give more benefits to startups focused on these business segments. “Another key input will be to have evangelists who can take accountability, ownership and champion the cause at the state level,” said Anand.

Alongside all this, to encourage greater competitiveness among states, DIPP is preparing a ranking of all states and Union Territories on the basis of their achievements in implementing their startup policies. The rankings are expected to be launched in June. For all these states-led initiatives and efforts, there still is a lack of clarity on what each state is doing to support startups, according to Mashelkar of Reliance GenNext Hub. “Knowledge can be disseminated through a single interface (capturing) Central and state government initiatives,” he said. “Startups can gain so much from quick and easy access to information through a search engine-type interface.”